Week Off to an Anxious Start
March 5, 2012
Share prices and commodities are lower, while the yen has strengthened.
Several factors are weighing on sentiment.
- The Chinese government revised down projected growth and did not foreshadow shifting policy priorities.
- Private sector involvement in Greece’s bond swap has been less than hoped.
- ECB stimulus has probably hit the end of the line.
- Euroland’s composite PMI slipped below 50 again, suggesting marginally negative GDP growth this quarter.
- Australia’s service-sector PMI fell by 5.2 points to 46.7.
The dollar is 0.7% weaker against the yen but has strengthened 0.9% against the kiwi, 0.5% versus the loonie and Aussie dollar and 0.1% relative to the euro, yuan and sterling. The Swiss franc is unchanged against the greenback.
Equities fell by 1.6% in India, 1.4% in Hong Kong and Taiwan, 0.9% in South Korea, 0.8% in Japan and 0.6% in Thailand and China. The German Dax, Paris Cac and British Ftse have traded downward by 1.1%, 0.8%, and 0.5%.
Gold fell below $1700 and is off 0.7% at $1697.60 per ounce. Oil slipped 0.6% to $106.06 per barrel.
Sovereign bond yields in Japan, Germany, and Britain are very little changed.
Officials in China forecast growth of 7.5% this year, down from 9.2% in 2011 and 10.4% in 2010. Consumer price inflation is projected to average 4.0% after 5.4% last year. Promoting price stability remains a key priority. The growth forecast, which is perceived as a target, is less than estimates in recent years.
China’s service sector purchasing managers index (PMI) rose 1.4 points to a 4-month high of 53.9 in February. The composite index of climbed above 50 to a reading of 51.8 from 49.7 in January. Such had been at 50.8 in December but 48.9 in November.
India recorded PMI scores of 56.5 on services and 57.8 on the composite index after January readings of 58.0 and 59.6. New business grew strongly.
After Australia’s PMI release with disappointing scores of 46.7 overall on services, 47.5 on sales, and 45.6 on orders, the finance minister expressed concern about the impact of an elevated Aussie dollar.
Japan is doing barely better than stagnation according to its February PMI readings of 51.2 on services and 51.2 on the composite services and manufacturing index.
Euroland PMI results were mixed across member countries and overall below the preliminary estimates reported late last month. The composite index returned to December’s 48.8 level from 50.4 in January. The flash indication had been at 49.4. The services PMI of 49.3 was down from a preliminary reading of 49.7 and a January score of 50.4.
- Italy’s services reading of 44.1 constituted a 4-month low, while the composite score of 44.7 was a 2-month low.
- Spain posted 41.9 for services, a 3-month low, and 42.9, a two-month low, on its composite index. As in Italy, recessionary forces intensified last month.
- The French economy is stagnating with scores of 50.0 in services, a 3-month low, and 50.2 on the composite index, which was a 2-month low.
- Germany’s services PMI (52.8) and composite score of 53.2, while better than preliminary estimates, were both lower than in January.
- Irish readings of 53.3 on services and 52.3 on the composite index represented to best scores in a dozen and ten months, respectively.
The British service-sector PMI dropped 2.2 points to 53.8, but January-February viewed together suggest Britain’s best quarter since 2Q10.
Hong Kong’s service-sector PMI reading of 52.8 was 0.9 points above January’s score and the best in ten months.
The non-oil PMI readings in Saudi Arabia and the U.A.E. of 59.6 and 52.0 in February were slightly lower than in January.
Russia’s services PMI fell by 2.2 points to 55.3 after a sharp upward spike in January. The composite score was 53.7. Vladimir Putin claimed victory in yesterday’s presidential election.
Retail sales volume in the euro area rose in January for the first time in five months but remained unchanged from the year-earlier level and 0.2% lower than the fourth quarter average of last year. Sales had fallen 3.3% at an annualized rate between 3Q and 4Q.
On-year Italian PPI inflation of 3.3% in January was down from 3.7% in December and the lowest since April 2010.
Euroland’s Sentix gauge, a measure of investor sentiment, improved 2.9 points to minus 8.2 this month from minus 11.1 in February and minus 21.1 in January. ECB stimulus through the LTRO has been a key factor behind the improvement but can do only so much. Considerable gloom continues to surround Greece’s "no way out" circumstances. Deposits at the ECB reached yet another record high of EUR 821 billion today.
Swiss retail sales rebounded 1.6% in January and were 4.4% greater than a year earlier, their greatest 12-month gain in seven months.
Turkish PPI and CPI inflation rates in February were at 9.2% and 10.4%. The PPI was 1.9 percentage points less than in February, while the CPI was 0.2 percentage points lower.
Aside from the aforementioned Australian PMI figures, that economy saw corporate profits dive 6.5% in the fourth quarter, the worst result in ten quarters. Job ads rose 3.3% last month, less than half as much as in January, and the TD-MI measure of expected inflation slid to the lower boundary of the 2-3% central bank target.
There are two important U.S. data releases today: factory orders and the services purchasing managers index. Chicago and Dallas Fed Presidents Evans, a dove, and Fisher, a hawk, will be speaking today. Super Tuesday primary elections are set for tomorrow.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Dollar, Euro, Service PMIs, Yen
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